The Nova Scotia Legislature

The House resumed on:
September 21, 2017.






Wednesday, April 7, 2010


Pension Regulation

Printed and Published by Nova Scotia Hansard Reporting Services


Ms. Diana Whalen (Chairman)

Mr. Leonard Preyra (Vice-Chairman)

Mr. Clarrie MacKinnon

Ms. Becky Kent

Mr. Mat Whynott

Mr. Maurice Smith

Hon. Keith Colwell

Hon. Cecil Clarke

Mr. Chuck Porter

[Mr. Gordon Gosse replaced Mr. Mat Whynott]

[Mr. Allan MacMaster replaced Hon. Cecil Clarke]


Department Labour and Workforce Development

Ms. Nancy MacNeill Smith, Superintendent of Pensions

Pension Regulation Division

In Attendance:

Mrs. Darlene Henry

Legislative Committee Clerk

Mr. Jacques Lapointe

Auditor General

Ms. Evangeline Colman-Sadd

Assistant Auditor General

Mr. Gordon Hebb

Chief Legislative Counsel

[Page 1]



9:00 A.M.


Ms. Diana Whalen


Mr. Leonard Preyra

MADAM CHAIRMAN: I would like to call today's meeting of the Public Accounts Committee to order.

With us today is Nancy MacNeill Smith, who is the Superintendent of Pensions, so we'll have the next two hours to explore that issue.

I would like to begin by having the members of the committee introduce themselves.

[The committee members and witnesses introduced themselves.]

MADAM CHAIRMAN: Thank you very much, and with that I would like to turn it over to Ms. MacNeill Smith to see if you have any opening comments - if you would like to give us a bit of context for today's meeting.

MS. NANCY MACNEILL SMITH: Good morning. Thank you for providing me with this opportunity to speak to you about the operation of the Pension Regulation Division and the application of the Pension Benefits Act to the municipal and private sector pension plans.


[Page 2]

I note in the material that was sent to me that you do have some follow-up questions with respect to the Auditor General's Report that was done previously. I would like to just reiterate that with respect to the regulation of pension plans, our goal is to ensure the ultimate pension promise is met. Our focus is in ensuring that the plan administrators and plan sponsors have the proper tools and the knowledge and ability to administer the pension plans such that the members do ultimately receive the pensions that they're promised.

With that, I'll turn it back to you. Thank you.

MADAM CHAIRMAN: Thank you very much, I appreciate that. For the first 20 minutes we'll begin with the Liberal caucus and I'll turn the floor over to Mr. Colwell.

HON. KEITH COLWELL: You met with us some time ago now, I can recall, and we went through this whole process. But just to bring me back up to speed again, you regulate the municipal plans and what others?

MS. MACNEILL SMITH: Municipal plans and private sector plans. The pension legislation applies to the hospitals of Nova Scotia pension plans - that's one of our biggest plans. The legislation does not apply to the Public Service Superannuation Plan, the teachers' pension plan, the judges' plan, the MLAs' plan, or Sydney steelworkers plans - there are two plans there.

MR. COLWELL: The process through the universities - you look after university plans?


MR. COLWELL: And the municipalities, as you've already said.


MR. COLWELL: What kind of shape is the municipal, HRM's, pension plan in at the present time?

MS. MACNEILL SMITH: The specifics on the plan - the plan's assessed every three years and those reports are filed with my office for review. The last review of the HRM plan was December 31, 2007, and the next review has to be prepared as at the end of this year.

The municipalities have been given a specific exemption for funding solvency deficiencies under the plan. Right now they only have to fund until the plan reaches 85 per cent of solvency, and those rules apply until 2016. At the last evaluation, HRM did not have to make any additional solvency payments because they were more than the 85 per cent funded. I don't know what their funding status will be on December 31, 2010.

[Page 3]

MR. COLWELL: Okay, and if they're below the 85 per cent, what kind of action?

MS. MACNEILL SMITH: They would be required to make special payments, which is additional money, contributions, made to bring them up at least to the 85 per cent.

Generally pension regulators across the country feel that if you're at 90 per cent funded, you don't have to do a lot of tweaking to the plan to bring it up into the full funding level, but once you're below the 90 per cent the plan administrator, the plan sponsors, the employees have to take some direct action in order to restore the plan to full funding. That issue has been left with the municipalities to wrestle with as far as how are they going to bring the plan back into full funding - similar to the action the province took yesterday with respect to the Public Service Superannuation Plan. Left on its own the plan would run out of money, so action had to be taken as far as the benefit payments that were being made in order to restore the plan to good health.

MR. COLWELL: Just to use the provincial one as an example because I know you don't regulate that, typically how long would be allowed or should it take to - like the province has about 69 per cent funded, and just using it as an example, how quickly would it typically take if you were administrating a private one, or municipality, would you require them to be up to the 95 per cent for instance?

MS. MACNEILL SMITH: We would normally require a pension plan to bring it up to 100 per cent solvency within a five-year period.

Now because of the fall in the financial markets in 2008, the government amended the regulations, under the Pension Benefits Act, which would allow pension plans that were less than 100 per cent funded to fund any deficiency over a 10-year period instead of the five-year period. That was to address the specific concerns with the fall in the markets, because assets for most pension plans dropped about an average of 20 per cent - anywhere between 15 per cent and 30 per cent, but normally 20 per cent.

Now it's my understanding from reports that are coming in now that most pension plans are very near what their December or their pre-fall in the market asset values were, so the markets have recovered to that extent, but they haven't recovered as far as what they should have earned in 2009 and what they are earning now. So there is still a gap there, but there has been a big recovery.

MR. COLWELL: That's positive; that's one thing we like to hear. Being an MLA, we see a lot of people in our offices who don't have adequate pension funds and it causes a great deal of grief upon retirement, so it's important that these are kept up.

Under the section of the Act that you look into, is the government considering any changes in the legislation that you are aware of?

[Page 4]

MS. MACNEILL SMITH: Yes, the government currently - the department released a consultation paper on proposed changes to the Act and the regulations. Commentary is to be back to the Policy Division of the department in mid-April.

MR. COLWELL: What sort of things are they maybe considering?

MS. MACNEILL SMITH: I'm not directly involved in the consultation. I guess the biggest one is looking at what the funding requirements should be long term. It's an issue that is being looked at all across the country - there were consultation papers in Alberta, and in B.C. there was a joint one; there's one in Ontario; and the federal government, Finance Canada, is also looking at that. So in my discussions with other regulators across the country we're all looking at what changes are going to be made to the funding requirements, what other jurisdictions are considering.

Hopefully we'll all move in the same direction and have the same requirements, most particularly because there are a lot of Nova Scotians participating in pension plans that are registered in other jurisdictions. You might have an Ontario plan that might have 5,000 members and have 500 in Nova Scotia, so it would be good that we would have the same treatment of those Nova Scotia members in the Ontario registered plan as the Ontario members. We're trying to harmonize as much as possible across the country.

MR. COLWELL: I know it's a big issue we had when Trenton Works closed - what was the final result of that when that all closed? I know we changed the legislation, but to me it seemed like a little bit too late.

MS. MACNEILL SMITH: Well it wasn't that the legislation was too late, the change that was made was to require an employer to fully fund a pension plan on windup. The situation with Trenton Works is that the employer went bankrupt. We would normally look to the assets of the employer to fund the deficiency in windup, but in the circumstance with Trenton Works there were really no assets left at the end of the day after the secure creditors had been paid off.

So the plan benefits were reduced by about 8 per cent and the assets for pensioners, pensions were purchased from a life insurance company, and for the active members who weren't retiring the benefits were transferred out to the locked-in retirement accounts.

Now, because of the economic situation in Trenton at the time and the fact that there weren't a whole lot of other jobs for these employees to go to, there were a significant number of former Trenton workers who applied to unlock some pension funds for reason of financial hardship. The pension funds were released in December of the previous year, 2008, so we had a lot of applications come through in January for financial hardship, and the majority of those applicants were approved.

[Page 5]

Now interestingly enough, applicants can apply once every 12 months on the basis of low income. Although we had expected a lot of these Trenton workers to come back to apply for unlocking more funds, they have not. It seems to me that these individuals have obtained employment and they are working and they don't need to access their funds. We have the odd Trenton worker applying but it's very low in numbers, so it's very good news in that sense.

MR. COLWELL: It's nice to have some good news out of that whole thing. It was a very bad situation for everybody. In your view, are defined benefits plans better than defined contribution plans for employees?

MS. MACNEILL SMITH: I would say most definitely because with a defined benefit plan you have a promise of the benefit that you're going to have on retirement. You're not responsible for doing the investments and you're sharing the risk about leaving your money with the other plan members in the pension plan. If you're in a defined contribution plan it's very similar to having money in an RRSP. You make contributions, the assets accumulate in value over time, but you really don't know how long you're going to live so if you have $200,000 at retirement at age 65, how much should you actually be spending from now until your unknown date of death? You're doing the investment yourself so you have to be - generally a pension plan would hire experts to provide for investment direction and expertise. If you're self-directing your funds, you don't have that same level of expertise. I personally cannot invest my RRSPs in the same manner as any of the pension plans that I supervise because they hire experts and I'm not an expert in investments.

[9:15 a.m.]

There's a lot in favour of the defined benefit plan for an individual versus the defined contribution, however, defined benefit plans can be expensive to operate. You need a certain mass before it becomes worthwhile. We have seen in the past actuarial expenses paid to the actuary to value the pension plan that are equivalent to what the employer pays for the current service cost to benefits earned under the plan. In that case, when your expenses are equal to the cost of your pension, you're too small, you shouldn't be having a defined benefit plan.

We've seen a lot of mergers of smaller plans with bigger plans over the years and then we've seen some defined benefit plans that switched to defined contribution plans, but a lot have merged into bigger plans.

MR. COLWELL: How difficult is it for, say, a small business in Nova Scotia - I know it's very difficult for them to build pension plans because it's an expensive, long-term obligation but an important one. Is there anything in place that would allow all these small businesses to go together with a bigger plan somewhere to really make it effective for their employees?

[Page 6]

MS. MACNEILL SMITH: We do have, under the existing rules, the ability for various associations to get together to form a pension plan and we have a number of them that are in place. For example, the hospitals of Nova Scotia, the Nova Scotia Association of Health Organizations Pension Plan has a large number of pension plan employers participating in that one plan. There are other municipal associations. Any type of association could group together to form one pension plan to share the costs that way.

MR. COLWELL: That's positive but really what I'm asking is if somebody, say, in Sydney has a small business with 10 employees - impossible to probably have a plan that's really cost-effective with that small number of people - is it possible for an organization like that to team up with 50 other organizations like that to get a plan that might make sense?

MS. MACNEILL SMITH: Under the existing rules there is no ability to do that. The Canadian Association of Pension Supervisory Authorities, which is the superintendents across the country, had worked on what we would call a model pension law for Canada and that's where we would recommend to your governments, if you're going to make changes to your pension legislation, look to this model law to see where we think you should be going.

One of the recommendations in that is for what's called a simplified pension plan where you would have a financial institution like an insurance company be the plan administrator and do all of the responsibilities laid out in the legislation as far as administering a pension plan. All the employers would be required to do would be remit the contribution from payroll. So that is one of our recommendations. It has been very successful in Quebec and it has been in Manitoba as well, but as far as a province-wide defined pension plan, there has been nothing recommended. The one that CAPSA had recommended was a defined contribution plan.

MR. COLWELL: I was just wondering because in today's economy, where we're trying to, number one, keep people working here in Nova Scotia - which is quite critical, and as our population gets older and older, of course, there is more and more strain on the pension systems - you also want to maintain young people, and young people don't really understand how important it is to build a pension. I think everybody in this room was in that situation when they were of the age when they started working.

It would seem to make sense, if you had something like that available to small business. You're talking about all kinds of different organizations here, generally, mostly government funded, one way or the other, whether they're non-profit or whatever, but they're still government funded. For the ones that aren't, the businesses out there that maybe have two or three employees, 10 employees, or even 50 employees that could tie into a pension system that might be province-wide that could still be administered by an insurance company or whatever, something that is reputable and secure, if there is such a thing anymore today in some of the financial institutions we have seen. It seems that that is a real gap, and then

[Page 7]

at the end of the day when people go to retire, the income isn't there. Most people live day to day and don't have the resources to put $100 away each paycheque or each month, whatever the case may be, towards retirement, even in RRSPs, so is there any consideration for doing that? I think that would help stabilize our workforce in the province long term and make it a lot better for employers to attract experienced people to their businesses, maybe even from outside the province.

MS. MACNEILL SMITH: There has been an initiative. It started with the Finance Ministers across the country, both federal and provincial Finance Ministers, in looking at what changes do we need to make to the retirement income systems in place in Canada to capture the group that you mentioned - the people who need pension coverage but are lacking it. So it's my understanding that a report has been made to the various ministers and that they are currently reviewing that. There are proposals relating to expansion of CPP benefits, implementing a private sector pension plan that various employers can participate in; they're looking at a number of options, but there has been no final recommendation made yet by any other governments.

MR. COLWELL: Yes, I know personally from dealing with people - again, in my own area, and I think it's the same right across the whole province - that when somebody gets the Guaranteed Income Supplement, their income is pretty darn low. It is just about impossible to survive on that kind of income today, and it is going to get worse and worse as taxes continue to increase and as everything else seems to go up. There is nothing there to help people along, and they're not at an age, typically, that can go back to work and help supplement their pensions. In some cases people do - they have to, they don't want to but they have to, and when they are past the time when they can work then their real trouble sets in. It takes a long time for that lack of income to accumulate, and when it does then they have a major problem on their hands.

I know you probably can't answer this question, but how much urgency has the government put on this? I mean, I think this is something that the sooner something is done the better.

MS. MACNEILL SMITH: It has a high priority among the governments across the country, because the nature of pension plans is that pension benefits are earned over time. Money invested has to be invested over a time period in order for it to do any good. You can't establish a pension plan and within two years be providing generous pension benefits. You earn the benefit each year that you work, so any fix that is put in place now will take some time before it starts to show any effect.

MR. COLWELL: That's my point exactly. Is it something that the province can do by themselves, I mean just here in Nova Scotia, and work with employers to set something like this up?

[Page 8]

MS. MACNEILL SMITH: Of course the province could do something on its own, but the administrative costs of something could be very high and if you can do something nationally, then that, to my mind, would work much better. You've got a much bigger group of employers to deal with, to share administration costs with the investment costs. You also don't run into problems if you have employees moving from province to province for employment. I think that we're facing a time when we're going to have a lot of labour mobility so that anything we can do to assist in that is worthwhile.

MADAM CHAIRMAN: Mr. Colwell, your time is just about up, maybe just 30 seconds.

MR. COLWELL: Maybe at the end of today you can talk about the Quebec system, they have a system similar to this in place, is that what you said earlier?

MS. MACNEILL SMITH: Yes, they have the simplified defined contribution plan in place and the rules are simpler, much simpler for the employers.

MADAM CHAIRMAN: Your time has elapsed so I will now turn the floor over to Mr. Porter for the Progressive Conservative caucus for the next 20 minutes.

MR. CHUCK PORTER: Thank you, Madam Chairman, and thanks for being here, Ms. MacNeill Smith. Pensions - a very interesting topic, I think widely though that it's something that a lot of people don't understand. You go to work; you get a job; they say you can pay into the pension plan, you pay into it; and we don't think about it for quite a few years and we don't really think about our money, I don't think, in general, especially when we're younger.

So I wonder if you could, simply put, simply Pensions 101, a brief overview - I don't know how I can put it - just simply, how does the pension work? So you get a job and you have an opportunity to pay into a pension plan - and I'm doing this for a reason and I'll come back to that after - but can you give me, just for the record, a brief overview of pensions in general, what our options are and how that works?

MS. MACNEILL SMITH: Certainly. When an employer decides to offer a pension plan for its employees, the employer may or may not involve the employees in the design of that plan. If they are unionized, generally they would, but if they're not unionized, the employer would look to establish terms and conditions under the pension plan that will achieve the objectives, which are to ensure that their employees will have some assets when they retire and something they can live on.

Generally the employer will make the participation in the pension plan mandatory. It then becomes a term and condition of employment. When participation of the plan is voluntary, people generally don't join in time. They don't start thinking about pensions until

[Page 9]

they're in their late 40s or 50s and if you join a pension plan at that time, even if you worked until 65, you still aren't going to have a very good pension. So the employer will decide what risk it can bear, does it want to offer a simple defined contribution pension plan? If it does - I'll take that one for a first example - the defined contribution pension plan, the employer selects the fund holder.

Under a pension plan the pension assets have to be held separate and apart from the assets of the employer. So the employer chooses the financial institution that's going to hold the funds. Usually for a smaller employer it's an insurance company. They establish their contribution rate. The employer will say I'm going to contribute 5 per cent of the payroll and the employees are going to match that. So it will be 5 per cent and 5 per cent - 10 per cent of earnings overall going into the pension plan.

The type of investments that are available for investing those funds, the employers generally select a number of investments, but a limited number, because they're required to make sure that the assets of the plan are invested prudently. So if it's a pension plan where the employees get to choose where the money is invested, they choose from a limited range that has been selected by the employer. So the employer is not going to give them the option of investing in a South American gold company. That's not a prudent investment, generally, for pensions funds.

The employer then monitors the plan to make sure that the investment options provided to the employees are appropriate. They may do something that's more common now, in that their assets shift as an employee gets older, so that you move away from equity into more bond-type investments when you're nearing retirement, and that should stabilize the asset fluctuations so that when you actually do need to retire and start receiving income from the funds it's not in the middle of one of these drops.

Under a defined benefit plan, the employer, again, decides they're going to assume the - basically there's more of a risk for the employer under a defined benefit plan. The employee contribution rate is generally established, and the employer is responsible for paying the cost of the plan that's over and above what the employees can contribute. If the benefits earned every year under the defined contribution plan are 15 per cent and the employees contribute five, then the employer's responsibility is to pay that 10 per cent. The plan is assessed every three years to determine what the cost is for the benefits that are currently being earned, and the costs increase as the employee group ages. If your employee group is generally aged 40, and through changes in the structure of who got hired three years later that age is actually 42 now - you've had fewer new young people come in and the older people are staying - then the cost of benefits earned every year is going to go up, and the employer is responsible for that increase in cost. The employer is responsible for directing the investments of the plan and for administering the benefits and for paying the costs. That's about it.

[Page 10]

[9:30 a.m.]

MR. PORTER: Thank you. I appreciate that overview and the time frame you did it in. That's a lot of knowledge in a few short minutes, and I appreciate that. It goes to a lot of questions, really, and I wanted to get to it. How many years - we talk about magic numbers. You hear all the time, well, I need to have this or need to have that. How many years do you need to pay into a pension to make it of a fair value when you retire? Maybe along with that - just to simplify that a little bit more for you for the answers - at what percentage? It's all part and parcel, I guess, anyway.

MS. MACNEILL SMITH: That analysis is being looked at in the initiative that the federal Finance Ministers are spearheading. If in your pension fund overall your cost is 10 per cent of payroll, that might provide you with a mediocre pension at retirement. When the pension benefit that you're earning over your lifetime is anywhere near 15 or 20 per cent, then you're going to have a pretty good pension. The general rule of thumb would be that at age 65 you're going to need $10 for every $1 of annual income, so if you want $10,000 in annual pension, you need $100,000. If you want $20,000 you're going to need $200,000, so the numbers are big.

MR. PORTER: Okay, then my next question on that is, there is always a certain amount of risk in this pension investment. I was part of a pension in a previous life where everything that you paid in, as well as what the employer paid in, was all at risk. It was totally based on the markets, where if the market dropped so did your investment. There was no guarantee - you could have actually ended up with zero if the markets bottomed out. Are you familiar with that kind of plan?

MS. MACNEILL SMITH: Well, if it's a defined contribution plan, yes, but the structure that's in place for the employers is that they're required to make sure that the investments of the plan are prudent. The requirement is that you're going to make sure that in doing the investments you're handling money with the standard of care that you handle someone else's money, in that you're going to be more cautious than if it's your own money.

MR. PORTER: I understand that fully. I guess what I'm getting at here is, in this example - and I'll come back to why it's important - we were all given a brief overview. The investment company comes in, somebody from the financial world comes in, and says here are all the options you can choose from, but it's up to you what you want to pick. How is that prudent? I'm assuming that doesn't happen in what you're overseeing.

MS. MACNEILL SMITH: No, because there are requirements under the legislation for prudent investments. We also have what is called the Capital Accumulation Plan Guidelines that are established nationally under CAPSA. Those guidelines assist the administration in ensuring that the example you provided doesn't happen. Under the CAP Guidelines the employer is required to select, out of the whole 50 possible investments that

[Page 11]

an insurance company may provide for your RRSPs or pension plans, that of those 50 the employer is going to choose maybe at most 10 that are available for employees to invest their pension money in.

MR. PORTER: So they're limiting actually what I could invest in anyway, of the entire group.


MR. PORTER: You are saying this is your pocket to choose from and hopefully they're going to guide me through that prudently. . .


MR. PORTER: . . . and to my benefit in the far years down the road.

MS. MACNEILL SMITH: Under the CAP Guidelines there's a requirement of making sure that employees receive proper information, that they're given education opportunities to learn more about which options to select. Also, one of the features being promoted now is, as I had mentioned, that once you reach - they're called lifestyle funds - once you reach a certain stage in your life, a certain age, then your investment options will be redirected into something even more conservative.

MR. PORTER: You talk a lot about the three year bit for the overview, why or how do you get to the three years? I'm just thinking about the fluctuation in markets. Things have been a bit volatile over the last few years, they're probably still going to be in a year or two ahead maybe. They're always volatile anyway, you never know what the markets are going to do and there's lots of analysts who can probably tell you that, but how do you justify three years, as opposed to annually?

MS. MACNEILL SMITH: Well the three years, as you say, is a snapshot of a particular point in time. It may be a good point in time or it may be a bad point in time.

Doing valuations is an expensive process, with the data analysis, the market analysis and also just the actuarial fees that are involved. The three year is a standard across the country for assessing pension plans. Generally there's not the fluctuations that we've seen. We had 2001 and then we had 2008, two very, very unusual events. We hope that they would not occur again but they're not the norm. It was not a very good 10-year period.

MR. PORTER: That will lead me to my next question anyway because we talk about the risk always in these pensions and people, certainly like myself, wonder how are we making money on the investments of our pension because RRSPs, for example, aren't making any money. You can invest in those and you are not making much by way of interest,

[Page 12]

or at least it doesn't appear that we are. How are the pensions different than the RRSP contributions?

MS. MACNEILL SMITH: Again it relates back to the choice of the investments that are offered under the pension plans, that they are generally more conservative. You might not have the wide swings in the asset values - they don't drop as low, they may not go as high but they're more conservative.

MR. PORTER: So they can go in and choose the low or medium risk or what have you and hope for the best as the markets do their thing and the banks do their thing and by way of making money it is totally wide open to, again the market values, the ups, the downs, the volatility and all of that.

MS. MACNEILL SMITH: Underlying investments - when I learned about investments years ago - you do have investments that are good value investments. You have strong companies, good rates of return, so those are the things that pension plans focus on, not the Nortels.

MR. PORTER: In one of your early comments, I think in the opening comment, you mentioned about the pension promise is meant by way of administrators and sponsors -is that what you are doing specifically, making sure that you can look back over time and there are investments, as you've just said, where they've been fairly stable regardless of the markets, they may fluctuate very little, is that where the majority of folks are invested in by way of pensions?

MS. MACNEILL SMITH: They have - generally there might be 30 per cent invested in Canadian equities, there's 20 per cent in bonds, there's some foreign equities, U.S. equities. The spread should be such that your fund is protected, so if there is a decline in one area then it's not going to negatively impact on your whole portfolio.

MR. PORTER: Okay, thanks. I understand that very much. I guess it's probably too hard to ask the question I was thinking of and that is how much fluctuation is there, but that probably depends daily on the way the markets do their business as well, and the trading and so on. You talked a little bit about financial hardships and others coming to you making application to draw funds - drawing funds from where? I just wanted to have clarification.

MS. MACNEILL SMITH: When a person terminates employment, and if they're not at retirement age, they are entitled to transfer the value of their pension amount out into what we would call a locked-in RRSP, a locked-in retirement account.

MR. PORTER: In that example, those pensions weren't lost, or those funds weren't lost, they were just locked in?

[Page 13]

MS. MACNEILL SMITH: Yes, they're locked in, so when an individual leaves employment, they transfer the value of their pension benefits out to a LIRA and they direct the investments themselves. We do have provisions under the legislation to allow for unlocking of these pension funds for reasons of financial hardship. There are three criteria of financial hardship.

The first is for mortgage arrears, where you're facing foreclosure. An individual may apply and be granted unlocking on that basis once in a lifetime. The second is for medical expenses that aren't covered under any other program. That's medical expenses necessary to treat an illness or disability, it has to meet that criteria. The third is for low income, when your income is less than - currently this year - $18,880. For individuals whose expected annual income over the next 12 months is less than $18,880, they can apply to unlock their pension funds.

MR. PORTER: Can they draw only up to that $18,880?


MR. PORTER: I'm going to assume this, I would think the answer is yes, they're taxed appropriately on the money they withdraw?

MS. MACNEILL SMITH: Yes. It does impact. If an individual is receiving Community Services benefits and they unlock pension funds, it will impact the payment of the Community Services benefits.

MR. PORTER: The clawback for that, you mean dollar for dollar? Is it dollar for dollar on that as well? I know there's a bit of room there that you can make a few dollars.

MS. MACNEILL SMITH: Yes, there is some. It's up to a limit, I'm not quite sure what it is each month. In some instances, if an individual, let's say, would withdraw $18,880, then their Community Services benefits would cease.

MR. PORTER: By way of guarantees - and that's a strong word when it comes to risk-type investments - are there guarantees that pensions will be there for the folks that are paying into them today? Based on the kind of legislation we have in place and based on the plans that the majority of people you deal with are invested in, does it need to be stronger?

MS. MACNEILL SMITH: The guarantees come with a price. The goal of the pension legislation is to make sure the benefits are there in the long term. But, we don't want to be so onerous that to ensure a 100 per cent guarantee, it's going to cost so much that plans won't be offered by employers. The balancing act is, you can make it very expensive and very secure. You can make it less expensive, less secure, there's some risk there, but is that risk tolerable? Or you can go back to no regulation and all risk.

[Page 14]

MR. PORTER: I know I only have a couple of minutes left, but I want to ask you, the end result is, obviously I want to have a pension at 55, 65, whenever I decide to retire. You gave a figure a little while ago about what I should be looking at. How do I reach that though? I guess I don't really think about what I'm accumulating in pension, what I'm investing, I don't think too much about it at this point in time, in my life. I'm starting to think more about it as I'm approaching that, but how do I know, how do people know in general what they need to invest and what they're going to need when they turn 65? How much money am I going to need to live on? I guess if I'm paying my salary today, whatever it is, let's say it's $50,000 a year, I want to make sure I have at least somewhere near that at retirement. How do I get there? Are these plans set up? Is the design there for that?

MS. MACNEILL SMITH: When you're looking at retirement income, you have to consider you're going to be getting Old Age Security and you're going to be getting CPP so all of your retirement funds aren't coming from your own pension plan.

MR. PORTER: It's about having enough to add up with the others that you should have, or projected to be comfortable, I guess, for lack of a better word, to get you there then.

MS. MACNEILL SMITH: That's right. I'm on the CAPSA committee. For defined contribution pension plans we're looking at - and we're working with industry, as well, on this - what do we need to do as regulators, or what does industry need to do, to ensure that members do have that information, in particular? There are Internet features available that will allow for projections to retirement - if you contribute this amount and your investments are this, then this is what you would have at retirement. So it's just making sure that's provided to the pension plan members.

MR. PORTER: I think that's a good plan and I think a lot of people really don't understand the whole pension plan idea, as you've suggested earlier on, especially when we're younger, we're 25 or 30, we're working, we're making a little contribution and, oh, yes, someday I'll retire and that seems like a lifetime away, but strangely enough the years go by quickly and pretty soon you're thinking about that. So I think it's good that you're part of that and I know, myself, we'll be looking forward to what that brings us by way of a guarantee, for lack of a better word, when my time does come to retire. So thanks very much for your time this morning.

[9:45 a.m.]

MADAM CHAIRMAN: Thank you very much, Mr. Porter, and your timing is perfect. We have the next 20 minutes allocated for the NDP caucus and I will call upon Mr. Preyra.

MR. LEONARD PREYRA: Thank you, Madam Chairman, and thank you, Ms. MacNeill Smith, for coming in this morning. It has been a real education for us and I

[Page 15]

especially enjoyed the questions that Mr. Porter asked. I didn't know you gave investment advice as well. I do want to follow up on his last comment. My daughter asked me this morning what I would be doing. I said, well, I'm going to the Public Accounts Committee and we're going to be talking about pensions and she said that's so boring. I think it is part of a general - and she's a university Commerce student, you know, and we still haven't made that kind of impact on people that pensions are important - probably the most important decision we'll be making and the political culture really hasn't changed around pensions. It is somewhat dry but also very important and I'm glad you're here today.

I wanted to take you back to the Auditor General's recommendations, the five recommendations, and we'll start with just recommendation one. The Auditor General says, ". . . the Division does not independently verify whether pension plan investment policies are prudent, approved policies have been implemented, and whether they are being properly monitored and comply with the Act. In addition, there is no verification of whether the market value of plan assets being reported annually by the administrators is accurate and whether required contributions have been made. Relying primarily on information reported by plan administrators is not sufficient."

The department at the time, the minister at the time, said that recommendation would be adopted and that we would be requiring periodic valuation of annual returns consistent with regulatory principles for a model pension plan developed by the Canadian Association of Pension Supervisory Authorities. I can't say I understand that answer and I just want to know, what does "periodic" mean and is that appropriate under the circumstances and what regulatory principles for model pension plan auditing are we following at the moment, at the current time?

MS. MACNEILL SMITH: Well, currently there is no requirement under the pension legislation for a plan administrator to file financial statements on a pension plan. I do have the right to ask for them on a plan-by-plan basis but there's no requirement that they're automatically filed. Now, I had referred earlier to the model pension law that was developed by CAPSA and in that model law there is a recommendation that governments do require filing of financial statements in certain circumstances.

Where the pension plan assets are held in the general assets of a life insurance company - for the smaller defined contribution plans that's generally where the money is - those pension plans would not be required to file financial statements. They're already subject to auditing under the insurance regime that exists in Canada. The pension plan assets that are more than $5 million, for those types of plans, there would be a requirement to file the audited financial statements. So those are the recommendations that we would like to make to government when we look at revising the pension legislation.

MR. PREYRA: Sorry, just to understand then, that government statement at the time, that audited financial statements would be required, was that ever followed up on?

[Page 16]

MS. MACNEILL SMITH: Well, we need changes to the legislation in order to do that. So we have had the review of the pension legislation, an independent panel made recommendations that were given to government in January 2009 and, as you know, the government changed, and we have had discussions with the minister since then. We released another consultation document where responses are due back in mid-April, the middle of this month, and from those subsequent consultations we would expect to develop a package of recommendations to the government for changes that would allow us to implement the recommendations of the Auditor General.

MR. PREYRA: So the department's general preference is that these administrators and these plans provide audited financial statements, is that what it seems to come down to in terms of best practices rather than the agency itself doing it?

MS. MACNEILL SMITH: We are not auditors. If you wanted us to assume an audit function then we would require staff that are auditors, trained in auditing, and going out and doing that. Generally, we would rely on the plan administrators fulfilling their role properly. As I had indicated, the financial institutions are already audited. The biggest driver to me in ensuring that a plan is properly administered and that the information is correct is the cost to the employer. If the information is not accurate, the employer is ultimately responsible, in the cash sense. If the funds are inaccurate, then they do have to make up any shortfall that exists, so it's in the best interest of the employer and the plan administrator to be as accurate as possible in all of their reporting.

MR. PREYRA: Thank you, I wanted to ask about another recommendation. The Auditor General was talking about performance measures for the supervision of defined contribution pension plans. Where are we with that, are there performance measures now in place that are acceptable and satisfactory?

MS. MACNEILL SMITH: Yes, we are currently tabulating the reports on non-remittance of contributions to the defined contribution plan. As per our discussions earlier, defined contribution plans, the employees generally select the investments from a limited group of investment funds chosen by the employer. The biggest risk under a defined contribution plan is just that the money is not paid into the pension plan. There's a requirement under the legislation that the plan administrators report any non-remittance to me. We do get notifications from insurance companies, periodically, of plans that have not remitted the funds, that they're late in paying the funds. So we follow up on all instances of advice of non-remittance and make sure that the funds are being remitted properly. So we're tabulating those numbers and keeping track of how long it's taking us to respond.

MR. PREYRA: That takes me nicely to the more contentious and controversial recommendation in the Auditor General's Report and that is Recommendation 5.2, where the Auditor General says, "The Pension Regulation Division should implement a process to periodically verify that pension plan assets are prudently invested. The Division should also

[Page 17]

verify assets are invested in accordance with legislation and the plan statement of investment policies and procedures."

The department, at the time, I think it was the only recommendation that the department and the minister took issue with. Could you explain to me what was that issue in that recommendation and why that recommendation was not followed up on?

MS. MACNEILL SMITH: Well, it's the administrator's responsibility under the legislation to ensure that assets are invested prudently, and prudence is a world process. You can't look at a pension plan investment in isolation and say, okay, we have investments in Nova Scotia Power, we have investments in a South American gold company, are they prudent? Looking at them independently, on that basis, you could not necessarily eliminate the South American gold company.

What you need to do is to look at the rules of process. What processes do the administrators have in place for determining whether the investments are in line with the objectives of the pension plan? You may have a very large pension fund that may invest 0.5 per cent of its total assets in this South American gold company. That may be very prudent.

The administrator establishes the processes that are in place as far as what are the goals of the pension plan, how do we choose the investment advisors, what limitations are given to the investments advisors as to the range of responsibilities. Prudence is really just that rule of process.

MR. PREYRA: So, to understand you correctly, the agency doesn't want to take responsibility as to whether or not monies have been invested prudently but the agency is principally interested in ensuring that procedures are in place that would allow the administrator to come to those prudent conclusions.

MS. MACNEILL SMITH: The prudence is the process. It is nothing other than that. What we have done - no government in Canada inspects pension plan assets to determine whether or not they are prudent. What we are working on, nationally, is guidelines for plan administrators to enable them to demonstrate that yes, indeed, they have been prudent in their investments. So CAPSA has a subcommittee that is looking at prudence of investment processes and developing guidelines that will assist regulators and plan administrators and plan sponsors in ensuring that each of the functions have been met.

MR. PREYRA: I'm not sure I understand the complexities of all of this but I was union president for a number of terms at Saint Mary's University and it was always an issue, especially in the last few years where there has been a lot of turbulence in the market as to whether or not we should invest in the housing market or in a particular company or in natural resources or in Canadian companies or American companies. What guidelines are

[Page 18]

you aiming for? I know you are talking about the establishment of general guidelines, what defines prudence? What touchstones or what basis do you use for establishing prudence?

MS. MACNEILL SMITH: Well in prudence you look at who is responsible for what. It's very specific as far as you have the administrator, you establish the statement of investment policies and procedures. What are the goals? What restrictions are you going to place? Who is the investment advisor? It is setting out roles and responsibilities for each party involved in the operation of the pension plan.

There are restrictions with respect to knowledge. You must ensure that the people, or the parties that you get involved in the operation of your pension plan, have sufficient knowledge to fulfill their functions. If you, as administrator, don't have the knowledge that you need, you have to obtain it either through education or by hiring experts who do have the knowledge.

There are requirements with respect to conflict of interest. You must ensure that the parties involved in the process do not have any conflicts of interest and you must have procedures in place where if a conflict arises, how you are going to address that. Everything has to be laid out in process.

There are requirements under the legislation for specific - besides investment of assets prudently, there are specific limits on investments. So you have to ensure that the parties involved in the investments meet those limits. Again, CAPSA has done a lot of work on what we would call the whole governance of the plan, to make sure that all of the features of the plan are handled properly.

MR. PREYRA: How does the agency manage risk for plan members? I know in the policies we had, the administrator would say you are young faculty you can take a little more risk and choose that portfolio, or if you are not you can do this, or if you are senior faculty ready to retire you should move into these types of packages. I'm assuming that the agency doesn't get into that level of detail about risk and risk management for the members, you are still interested only in the larger governance of the plan itself, but you have no way of - there is no alarm bell that is triggered in the agency if something seems out of kilter, that this plan is too heavily invested in mortgages in the U.S., for example?

MS. MACNEILL SMITH: No, we do look at plans specifically. The pension plan that you participated in, the university is required to ensure that the options provided to you are balanced overall, that they're not going to provide too much risk. The institutions also ensure that there are training modules available, educational tools to assist you in making your investment choices.

[Page 19]

[10:00 a.m.]

As I indicated to you, the industry overall is looking more at lifestyle funds. As you get older, you probably should shift your investment more to one way or another. Of course there are individual decisions that come into play - if you have sufficient other funds, like property that you own or you have other resources and you're not relying entirely on your pension for your income, then that gives you a different perspective, it may lead to different choices than for someone else who was relying solely on their pension plan for their income. They are all tools for these plans and there are guidelines under the Capital Accumulation Plan Guidelines that assist the administrator in meeting their responsibilities, just in making sure that those assets, the investment options available to you, are appropriate.

MR. PREYRA: There seems to be an expectation that the agency will exercise more of an oversight function over these pension plans, given the fact that so many of them appear to be in difficulty - do you see the agency moving more into sort of looking at the due diligence part that was previously the responsibility of plan administrators and advising them and guiding them and saying that in itself may not be prudent? Although I understand that your definition of prudence here depends very much on what the administrators want to do and what degree of risk they want to expose themselves to.

MS. MACNEILL SMITH: We have actually spoken to plan administrators about the investments of their pension plans in the past. I've done that on a number of occasions over the years, not a lot but in some, and made recommendations to them that you should focus on this particular aspect of your pension plan and make improvements in it.

We have exercised that oversight function already. Whether or not we're going to do more of an audit function on pension plans, we would need more staff. In our analysis of pension plans we have to identify what is the risk. If you're going to provide regulatory oversight to address a specific risk, what is the risk? With respect to investments, the risk is less in the sense that the employer is ultimately responsible if the investments don't work - so that is the biggest hammer to ensure proper governance of the pension plan than anything that I could impose, because it is money coming out of the employer's pocket.

We will be, through CAPSA, looking at providing more guidance and guidelines and educational tools for administrators, to make sure they know how to do their job properly. Education is a big regulatory tool as well - it is not just audit in that it is not just reviewing, it is helping plan sponsors to do the right thing. Plan sponsors, generally, who provide pension plans are good employers - they want to do the right thing and it is my role as a regulator to help them do the right thing as well.

MR. PREYRA: I'm glad you are doing that because I know that certainly in my limited experience, and you were talking earlier about the knowledge standard, most of the people who sit on these committees and boards tend to be people who are interested in the

[Page 20]

issue and may have some experience, but there's no real requirement that they have that degree of knowledge or training. Most of that work, certainly in my experience, is farmed out to a professional body like an auditing company that will do it for you, but the people who are actually sitting at the table are really just ordinary people trying to do a very difficult job and I'm glad to hear that there will be a little more training for them.

MS. MACNEILL SMITH: Yes, nationally that's what we're focusing on, ensuring that people are adequately trained and they have the knowledge and tools to do the job that they have to do because it's always volunteer work, in that sense. You don't go out and hire a member of a board for a pension plan.

MR. PREYRA: Yes, with several million dollars at stake, sometimes $1 billion, and you've got a volunteer board.

MS. MACNEILL SMITH: Yes, and in some cases the pension plan assets are bigger than the assets of the company. The operation of a pension plan is as big a business as the business.

MR. PREYRA: I'm assuming I'm out of time, I have a quick question.

MADAM CHAIRMAN: You're just coming up to, yes, you're done. It's 10:05 a.m. which is right on the mark. There will be a second round of 15 minutes for each of the caucuses just so that you can save those good questions for the next round. I would like to turn the floor over now to Mr. Colwell of the Liberal caucus and you have 15 minutes.

MR. COLWELL: Back to the establishment of a provincial or national pension plan, what's the population threshold to establish such a plan for, say, employers outside the provincial government plan? There must be a magic number there somewhere. Quebec has one and is that one efficient at the population they have? I don't know what Quebec's population is right at the moment.

MS. MACNEILL SMITH: What Quebec did under its simplified pension plan rules is it allowed - it's not operated by the Quebec Government itself - they allow financial institutions like an insurance company to set up what they call a simplified pension plan where unrelated employers can participate. It operates - it's like a large, defined contribution pension plan. All that an employer does, and all the employees do, is just pay the money into the pension plan and the insurance company acts as the administrator and does all of the investment concerns. So the individual employer is not responsible for choosing the investment options provided or managing the pension fund at all. That's done by the insurance company because they are the administrator. So it removes all of the duties and responsibilities from the employer and puts them on the insurance company.

[Page 21]

That simplifies things because, as Mr. Preyra had said, you have to have an educated board in order to make the proper decisions relating to the pension plan, or you have to have the educated administrator, and that is a lot of responsibility. So the simplified pension plan is attractive to employers in that it relieves them of those duties.

MR. COLWELL: The population of the province now - would a system like that work?

MS. MACNEILL SMITH: I believe it would. I'm not sure what it would do overall to increased pension coverage. In Quebec, when they first changed the rules, it really didn't take off and it was not successful because they had prohibited existing defined contribution plans from becoming simplified pension plans, but they removed that barrier and now existing plans can move into the simplified version. They are seeing growth in coverage now but it did take a number of years for it to become successful.

MR. COLWELL: Would something like that work better if it was like the Atlantic Region or the Maritime Region doing that because there are a lot of common things that we have in, let's say, Atlantic Canada?

MS. MACNEILL SMITH: I would support a regional plan. It would certainly work very well.

MR. COLWELL: And learning from the Quebec experience, probably the uptake would be a lot quicker once businesses and other organizations realized what it was.

MS. MACNEILL SMITH: Yes. I guess it's a matter of educating employers, and employees as well, in just how important it is to have a pension plan and retirement savings and with a pension plan there's no drop in contributions in the same way that you would have under personal RRSPs. You might choose, as an individual, not to contribute to your retirement savings in one year but if you're in a pension plan you're forced to contribute every year. That makes a huge difference in the ultimate outcome as far as what the amount of the pension benefit would be.

MR. COLWELL: Back to the HRM , and I just use HRM as an example because we have many municipalities here in the province, some of them are quite small and must be really struggling with their pension plans. Have any of the municipalities gone together to address this?

MS. MACNEILL SMITH: The Union of Nova Scotia Municipalities does have a pension plan for its members. It's a defined contribution plan so they do already pool their resources together to operate that.

MR. COLWELL: Is that working well, or appear to be?

[Page 22]

MS. MACNEILL SMITH: Well it works as well as any defined contribution pension plan. The money is going in and the assets are invested and the members are getting benefits, so yes.

MR. COLWELL: Are all the municipalities involved in that or just a few?

MS. MACNEILL SMITH: There are municipalities that have their own pension plan. Generally the smaller municipalities are in the group pension plan.

MR. COLWELL: You indicated that HRM has a break with the exemption from being fully funded to 85 per cent, I believe it was. Is this something you think is positive to continue beyond this, or is it something that should be changed so they can maintain it to 85 per cent, or should they really be closer to the 100 per cent?

MS. MACNEILL SMITH: It's my belief that the solvency test is the appropriate test for pension plans. It's not about whether or not you have enough assets to pay all of the benefits if the plan was wound up. The solvency test is really a stress test, the indicator of the health of the pension plan. It is the test that is now recommended by the Canadian Institute of Actuaries, it's recommended by the International Accounting Standards Board for evaluation.

The solvency is the appropriate way to assess the liabilities of the pension plan. It's a market value assessment, so it's the same as market value is the way your property is assessed for tax purposes, so the method of assessment is appropriate. What's up to governments is to determine if the assessment reveals that there is an unfunded liability, how long do you give the employers to make up for that deficiency. To me, the role of government is to determine what is that length of period for making up for the deficiency.

MR. COLWELL: I believe I heard you properly and I think I did, that basically - I'm just going to talk about HRM because it's an issue. If HRM didn't invest properly, if their investment people didn't invest properly, that's going to cause a problem, or in general the markets drop and that doesn't happen, or they don't contribute enough to bring this up-to-date, there's no way of really policing to see if they've invested this properly. Is there any way to do that?

MS. MACNEILL SMITH: We certainly do have the ability to police. If we had a question regarding the investment of the HRM pension fund we would have the ability to go in and look at the documents relating to the investment. Again, it would fall into an issue of were the investments prudent, so we would have to look at, are the procedures in place for determining who makes the investments if they're done in accordance with the direction of the plan administrator. All of that process would be followed, but here have never been any questions raised about the nature of the investments of the pension plan.

[Page 23]

MR. COLWELL: I'm guessing it's probably because some of the people who are in the pension plan - I've got some inquiries from people who are in this pension plan who probably didn't realize that could happen. That's probably the reason you haven't got the inquiry, that would be my bet, but that's just a guess on my part.

MR. PREYRA: On a point of order, I want to make sure that the member is not saying that the HRM pension plans are in trouble or that there's any conflict there, that you're talking about it in general.

MR. COLWELL: I'm talking about it just in general. I thought I was clear with that but evidently I'm not.

It's an issue that the funding - well, there is a problem with the pension plan because it's not indexed, it hasn't been indexed for a number of years so that is an issue - and for pensions of people who have retired some years ago it has caused them a great deal of financial stress. I guess from that standpoint it is in trouble and the fact that they don't have 100 per cent funding, as they're supposed to have, and struggling from what - we have recently received a briefing from the municipality and this topic was brought up and they are having a great deal of trouble keeping up to the 85 per cent.

Do you feel, as administrator for this plan, that they really should be at some point in the future up to the 100 per cent?

MS. MACNEILL SMITH: I believe that all plans should be up to 100 per cent, including government plans. The measure of whether or not you have enough assets to pay for the benefits in the long term should be whether or not the plan is solvent. There are plan design choices that employers have made over the years that impact the cost of the plan. If you have a pension plan that provides indexation, for example, they may have chosen not to provide for a bridging benefit on early retirement or they may have decided that rather than paying a full 2 per cent of pension for lifetime, they will reduce the pension at age 65, recognizing CPP benefits. They may decide that rather than providing for the cost of the survivor benefit to the pensioner that the member would have to bear the cost.

[10:15 a.m.]

There are a number of plan design issues that impact cost so it is the choice of those design issues that would determine overall the cost of your plan. So if you have a plan that becomes unaffordable in the long term, then you have to make choices about your plan design. Can you afford the current design and, if not, what changes do you need to make.

MR. COLWELL: Typically if you go through a system like - and I'm just using municipalities for an example here - if you go through a process like that, are there regulations or changes it would have to make? Would they have to approach you with those

[Page 24]

changes or is there something they can do internally, without any kind of consultation, as long as they get up to where they are supposed to be?

MS. MACNEILL SMITH: Any amendments made to a pension plan have to be filed with me for approval. If there are any changes prospectively that may reduce members' benefits, then the members do have to be notified of the changes.

MR. COLWELL: Who regulates the provincial pension plan?

MS. MACNEILL SMITH: For provincial government employees?


MS. MACNEILL SMITH: That's not regulated under the Pension Benefits Act.

MR. COLWELL: Cabinet would control that basically, under regulation?

MS. MACNEILL SMITH: It's my understanding - again, it's not my responsibility - it's my understanding it is the Minister of Finance.

MR. COLWELL: So they would have to come back and change the contributions or the benefits or whatever the case may be.

MS. MACNEILL SMITH: Yes, any changes would require amendments.

MR. COLWELL: Would that have to go through Cabinet, do you know, for approval?

MS. MACNEILL SMITH: Again, it's not my - any Act would require - changes to any Act are not done by Cabinet, it would be done by an Act of the Legislature.

MR. COLWELL: Okay, I just want to get your opinion on it, that's all. I know you don't regulate it, I'm not trying to put you on the spot here in any way.

The other issue again with a pension fund that is portable - I like that approach to pension legislation - when you are young and you just start working you don't really care, you figure you're never going to reach retirement anyway, whatever your excuse is - but if you could pay in those early years it makes a huge difference, as you say, in the contributions and the benefit at the end. When we look at possibly some day having a pension system across the country or in the Maritime or Atlantic Region, it is going to take many, many years to get it up to speed where it is really going to benefit people. How long do you think before something like this was initiated before it really starts seeing a benefit down the road. Would it be 20 years, 50 years?

[Page 25]

MS. MACNEILL SMITH: Generally you'd be looking at something like 20 years, I would think, 15 to 20 years.

MR. COLWELL: That would be to start to see a real positive benefit . . .

MS. MACNEILL SMITH: Well that's when you would start to see payouts of any significance.

MR. COLWELL: It would take many years after that before the plan got itself well established and enough members into it to really benefit people, would that be correct?

MS. MACNEILL SMITH: No, that would just be a factor of how well you sold it. I mean, if you put enough effort into it and were able to get enough employers and employees enrolled in it, to me that is just solely the function of your ability to sell the plan.

MADAM CHAIRMAN: You have one minute left, Mr. Colwell.

MR. COLWELL: It intrigues me because - and again I say, and I'm sure all my colleagues here in the Legislature have the same problem - we see so many people in this province who are struggling because they didn't plan ahead, or they didn't have the ability to plan ahead, because of income or whatever the case may be. I really look forward to some kind of an improvement in this system, in the province to start with, and hopefully across the country, and I asked the urgency on this. Is there a real urgency or is it just something that has been talked about for 10 years and really has not gone anywhere so far?

MS. MACNEILL SMITH: We have not had the level of interest in pension plans that exists now for a long, long time. It's discussed everywhere at the provincial level, at the federal level, in all venues and with labour and employer groups, so now I believe is the appropriate time, that if there is anything that needs to be done will be done now.

MADAM CHAIRMAN: With that, we will turn the floor over to the Progressive Conservative caucus and Mr. MacMaster for 15 minutes.

MR. ALLAN MACMASTER: Thank you, Madam Chairman, and Ms. MacNeill Smith, how are you today?


MR. MACMASTER: That's good. My first question involves a technical matter and I would like to give you an explanation and perhaps you could give some commentary or some advice on it. This involves a real life situation, I can assume this has happened more than once when the commuted value of a pension is taken, the lump sum is taken out of the pension plan, and in this case - there were two different cases - in the first case there was a

[Page 26]

couple who were still married and the spouses were living together, of course they're still married, and the amount, the commuted value was higher than the added amounts of another couple who - in this case both gentlemen worked for the same organization and they worked for same number of years, so you would think that they would have the same pension amounts coming out, but in the second case where the couple was divorced and they were no longer living together, if you added up the amount that she got and he got, they didn't come to the same amount as was in the first case. Could you give some explanation? Is there something under the pension legislation that would cause that to happen? And if you have questions, you can ask them back, if you're trying to clarify the situation.

MS. MACNEILL SMITH: The commuted value of a pension is basically its current value, its market value now. The values for two employees who have worked for the same length of time, and participated in the pension plan the same length of time, may be different because the older you get the more your pension is worth. So if you worked for 20 years and your co-worker worked for 20 years, you both leave the plan at the same time, but if I'm age 60 at the time I leave and you're age 40, my pension is going to be worth a lot more than yours.

Also, most defined pension plans are based on earnings level, so although we worked for the same length of time, you made more money than I did, your pension is going to be worth more than mine, because it is a bigger pension, because it is based on salary. So those factors can impact on why the commuted values are different.

MR. MACMASTER: Okay, thank you. I do also know that because women live longer than men, there is an allowance made for that, so in some cases a woman would get a larger pension to recognize the fact that she is going to live longer, she is going to need more assets to sustain the income being produced for her. I know that can be a factor too. But in this situation, I think in both cases these gentlemen were around the same age, maybe the spouses were different ages.

MS. MACNEILL SMITH: It would probably be based on the earnings level being different.

MR. MACMASTER: And their earnings level was the same, too. It's funny, they both started out on the same time, had similar careers, but they - and maybe the best question I should ask is there somewhere where people can go to get the answer, because the gentleman did try to go to the pension agency responsible and they handed him a document, and it was rather complicated, and unless he takes it to a lawyer, which he could do, he could have it interpreted, but it is difficult to get an answer. Is there somewhere the question could be asked and an answer could be given?

MS. MACNEILL SMITH: We do have individuals - pension plans come to us on specific matters that link to their own pension plan. We couldn't do a comparison with

[Page 27]

someone else unless we also had that other individual coming to us at the same time and agreeing to co-operate.

MR. MACMASTER: If we were to direct something in writing giving two case scenarios with no names and no personal information, is that something your office could evaluate and provide some commentary back to us?

MS. MACNEILL SMITH: We would have to know the formula of the pension plan and a lot of information, but we would certainly look at it.

MR. MACMASTER: Okay, I would appreciate that and may endeavour to do that at some future point. I'll try to stick to less technical questions for the remainder.

One of the things I noticed in the annual report for 2009, and I'll read it for the benefit of the other members on the panel here today - this is a summary of some of the current items and one of them is: "A Defined Contribution Plan Committee was established to review current approaches to regulating and supervising defined contribution pension plans. A Terms of Reference and Work Plan for the Committee was approved by CAPSA in March 2009. This Committee will also establish an industry working group to provide input and advice to the Committee."

Could you give us an update on that defined contribution plan committee?

MS. MACNEILL SMITH: I'm actually a member of that committee. We've had a meeting with the industry stakeholder group last June and we received a tremendous amount of information as a result of that meeting. We've had several revisions of paper. Our proposal is to meet with the stakeholder group again next month and following that meeting we'll make some more revisions to our paper and we'll proceed with recommendations both for industry and for government to consider in the administration and regulation of pension plans.

MR. MACMASTER: Who is on that committee?

MS. MACNEILL SMITH: There are representatives from different provinces. I'm representing Nova Scotia on that committee, so there are representatives from other jurisdictions as well.

MR. MACMASTER: Is it just one representative from our province on that committee?


[Page 28]

MR. MACMASTER: May I ask, would you have experience or background in defined contribution plans?

MS. MACNEILL SMITH: Yes. Yes, I've had 30 years experience in pensions, both with an insurance company and with a consulting company and then with government.

MR. MACMASTER: Okay. The company you worked for, did it offer defined contribution plans?


MR. MACMASTER: Okay. The next question I have also relates to defined contribution plans. There's an element - and I'll actually bring to the attention the pension review panel's final report that was produced in January 2009 - there was an opportunity that I think was missed in the report and that was an opportunity within these defined contribution, or DC plans, for plan sponsors to give their members advice. Have you any thoughts on that?

MS. MACNEILL SMITH: The problem with giving advice and the great fear of employers is that they would be sued if they gave wrong advice. The recommendations under the Capital Accumulation Plan Guidelines are put out by CAPSA and the industry for making sure employees are educated and that they're given enough information to make appropriate investment decisions. As far as advice, the employee always has the option of going to someone else for advice, but advice from an employer on what should be invested is really kind of dangerous territory.

MR. MACMASTER: One thing the report did miss was in the United States they're looking at putting legislation through called "safe harbor" legislation, and this will give employers some protection so that if they get someone in who's qualified to give advice and they give advice to their employees to help them to ensure they have a good experience with saving and to ensure they have enough assets at the point of their retirement, they want to bring in this safe harbor legislation. That was missed in the report. Has your office ever done any research on that?

MS. MACNEILL SMITH: Safe harbor is actually in place in the United States. It has been in place for some time. When CAPSA was looking at the development of the Capital Accumulation Plan Guidelines, we looked at whether or not we should introduce safe harbor legislation in Canada, and the conclusion was that safe harbor really wouldn't work with the court system that exists in Canada. With the Capital Accumulation Plan Guidelines, the plan administrator establishes the processes and the procedures that are needed to make its decisions, and adherence to those guidelines is actually a very good defence against claims for wrongful action. So the conclusion was that in Canada we're better off with the guidelines as the defence for the employer to any lawsuit.

[Page 29]

MR. MACMASTER: I think we're missing an opportunity, and I notice that the idea of a safe harbor was really panned in the report. One thing I would like to point out for the members on the panel is that there are actually four large insurance companies in Canada that dominate the defined contribution pension offering, and it would be very difficult for them to provide advice because of the nature of their operations. Do you think that some of their influence and perhaps some of that cultural mindset has influenced the decision on whether or not to look at safe harbors, because if the United States has looked at it and has seen it as a value to people who live there - and we've even talked about it today, the importance for members who are in defined contribution plans to have some advice so that they have some protection, so that they have retirement assets. Do you think that we should take another look at that?

[10:30 a.m.]

MS. MACNEILL SMITH: Well, we have looked at it thoroughly. I'm not a strong advocate of American legislation. The Americans do not have any locking-in requirements in their pension legislation, so the plan members are able to withdraw their funds, and that has led to, I guess, the small amount of pension assets that are available for people in retirement in the United States. As I said, we did look at the safe harbor rules and felt that it really was not appropriate for Canada. We have had good experience to date with the defined contribution plans.

As you know, the consolidation of the insurance industry in Canada came over a number of years. We used to have a larger number of insurance providers in Canada, but through amalgamation over the last 15 years we're down to a much smaller number. However, the financial system in Canada was very robust during 2008 when the American system had some strong failures, so I do believe that we have a strong system in Canada.

MR. MACMASTER: Madam Chairman, I would say that if at any time there is an opportunity for government to do something that's in the best interests of Nova Scotians who are saving for retirement, I think we should look at those options. Whether it's American legislation or other legislation, I think that if it makes sense to do it, it should at least be looked at. It's something I plan to look at and present to government in the future, because from my own personal experience I think it would be of great value. While it may be inconvenient for some of the strong players in the industry, I think it would make a difference for people in Nova Scotia who are members of DC plans.

The next question I would like to ask is around the unlocking of funds from pensions that are registered in the province. The federal government has seen fit to allow the unlocking of 50 per cent of pension amounts. To give an example for members here, you could take, for instance, a university professor - there are a number of universities in Nova Scotia that have these types of plans, and when they retire, they take out a large lump sum. They are prescribed, based on the legislation, to only be allowed to take certain amounts out each year.

[Page 30]

One of the problems with that, while it does protect them going forward to ensure they have enough assets to last over the course of their life, is that it restricts them if they want to spend more of their money today. Some people feel it's harmfully prescriptive. The federal government has decided to change to allow a 50 per cent unlocking to give members greater flexibility. Why wouldn't we consider doing that in Nova Scotia?

MS. MACNEILL SMITH: I can't speak for government because government has made some exemptions to legislation, but in my experience over the 30 years that I've been in pensions, locking in is a good thing. On a personal note, when I had left my previous employer with an insurance company, the rules at that time were that you were only invested or locked in if you were age 45 and had 10 years of experience.

So I left my first job, although I contributed to a pension plan I only got my own money back, which had been accumulating at 3 per cent interest. The same with my second job, five and one-half years, no investing, no locking in, only got my own money back. So I had seven and one-half years of actual pension plan participation with no pension benefits to show for it. My own contributions weren't locked in and I used them to buy a house so I have seven and one-half years of pension plan participation and no pension to show for it.

Locking in is the reason we have good pension values for individuals. Pensions are not savings accounts. They are there for society's need to make sure that individuals have assets in retirement when they can no longer work.

MR. MACMASTER: What's interesting though is that if you have a couple who has one of these locked-in accounts and if the spouse who had owned the account passes away, the amount that passes on to the spouse is immediately allowed to be unlocked. I think that it's something we should look at and it's something that if your spouse dies, you immediately have access - the other spouse has access to it. Why not let them both have access to it before something like that happens? That's the argument I would put forward.

MS. MACNEILL SMITH: My argument would be going more the other way in that we should actually impose locking in on a spouse as well. We've got a very old population in Nova Scotia. We have to ensure that people have sufficient funds in retirement. The 50 per cent unlocking done by the federal government, and done out West, and in Ontario was not done on the basis of any policy analysis to show what is the effect. If we are going to unlock this large amount of funds, what is the impact going to be on our retirement income for our seniors? Nobody has done that study.

MADAM CHAIRMAN: Your time really has elapsed now, Mr. MacMaster, thank you very much. I think it was an interesting answer that we needed to hear as well. I'd now like to turn, for the next 15 minutes, to the NDP caucus and Mr. MacKinnon has the floor.

[Page 31]

MR. CLARRIE MACKINNON: Thank you very much, Madam Chairman. I just want to say what a pleasure it is to have Ms. MacNeill Smith here today because during the Trenton days we interacted so often by telephone and my office sort of became the hardship office. We had so many cases that we referred to you that I must say your office was swamped. I congratulate and commend you and thank you, as well, for the work that you did during those difficult days.

One question before I revisit the Trenton pension situation. I have constituents who are concerned about the federal legislation in relationship to taxation where some are allowed to split pension benefits with a spouse and others are not. I'm just wondering, of the ones that you administer, down the road what percentage of these would be involved in the opportunity to split from a taxation perspective?

MS. MACNEILL SMITH: I really can't speak to the taxation end at all, I don't administer that legislation. It was my understanding that it's the choice of individuals as to whether or not they wish to split their pension income but wasn't aware of any restrictions.

MR. MACKINNON: Thank you very much. Revisiting Trenton, there was certainly dismay and disgust with the situation with Greenbrier going bankrupt. When one arm was being hived off Trenton, the company was still viable and operating and reinvesting in Mexico, so the Trenton bill didn't do what it was intended to do in protecting those workers, but that was a province-wide initiative. Has that helped other people in the province, or will it help others in the future?

MS. MACNEILL SMITH: The requirement for an employer to fund any deficiency on windup has helped other groups of employees who were in pension plans. There are big closures, like the Moirs chocolate factory in Dartmouth, and also the Maple Leaf plant down in the Valley. Both of those plans were topped up by the employers on plan windup, and it was because of that particular legislation, so it has proven to be very useful and I believe it will be more useful in the future.

MR. MACKINNON: Thank you very much, because there was the feeling that this bill was brought in for Trenton, but it did have implications throughout the province.

MS. MACNEILL SMITH: With the structure of companies, of course, each portion or each operation of a company is its own separate entity. That is done to protect the other companies that are operating under that parent company, to ensure that the whole enterprise doesn't collapse with the collapse of one of its portions. That is quite typical in businesses today. You would rarely see a company that was not specifically related to a specific site.

MR. MACKINNON: At the time of the Trenton termination of operation, there were misrepresentations by some segments of the media in relationship to the actual numbers that were affected by the termination of employment there. We were dealing with over 1,200

[Page 32]

employees there, and it sort of went down in increments of 300. The media of the day, some aspects of the media, indicated that 300 were, in fact, terminated, but over a period of months it was actually over 1,000 who were terminated. How many hardship cases did you end up with?

MS. MACNEILL SMITH: Specifically for Trenton, I don't know the number, but I do know that when we had the applications come in for 2009, I believe it was - just let me look at my figures here - we had a bump, what we call the TrentonWorks bump. That came in January and February, so in 2009 we went from a normal of, say, 20 applications per month - we had a slight bump in October - to 65 applications in the month of January. Those were the TrentonWorks people. We went from a normal of 28 to 65, so we had 45 more per month coming in as a result of the TrentonWorks.

We also had another bump this year, from applicants with the Moirs chocolate factory, and we had a very slight bump of applicants relating to the closure of the plant down in the Valley.

MR. MACKINNON: A very quick question in relationship to the setup with Aon, I believe was the company - a Quebec-based company ended up looking after the pensions, and had an administration cost of $0.25 million from that. How did that company end up looking after the pensions?

MS. MACNEILL SMITH: Aon was the consultant all along on the pension plan. It was familiar with its operation, so it was chosen to be the administrator on the basis that there wouldn't be any cost associated with them getting up to scratch with respect to how the plan operated or its benefits.

Aon spent a considerable amount of time - more than I've seen any administrator in windup - in actually meeting with the employees and talking to them about the level of the benefits available to them. For the most part, most of the Trenton workers only received a pension worth about $30,000, so Aon met with the individuals and said, for those of you who are under age 65, saving this $30,000 is really not going to benefit you because it will mean that you won't be eligible for Old Age Security, it's not really enough to make a difference. So they worked with all of the employees in making sure that they understood the choices that were available to them, that they could apply for unlocking for financial hardship, making sure through all steps that they understood as much as they could. So from my perspective, yes, it was expensive, but it's always expensive winding up a pension plan.

MR. MACKINNON: Thank you very much. I had some other questions, but I am going to pass along. I do think it was well handled and I think you did a great job as well. Thank you.

[Page 33]

MS. MACNEILL SMITH: I do have one comment to make with respect to the Trenton workers. We had expected a second wave of applications from TrentonWorks and they haven't come in. It's my understanding that these people are now fully employed.

MADAM CHAIRMAN: Mr. Smith, you have a few more minutes, until 10:51 a.m.

[10:45 a.m.]

MR. MAURICE SMITH: Thank you. I just have a very few questions that I wanted to ask. As I said at the beginning, I'm from Antigonish, a university town. The plan at the university is a defined contribution plan and that would be one presumably that is administered by your office.


MR. SMITH: Now, I wasn't in that kind of plan myself so I don't really understand a lot of the nuts and bolts of it, but the employer puts in funds, the university - let's say a professor puts in funds - I know it goes through all the university employees, but they put in funds. You had suggested that maybe a 10 per cent figure, so if you wanted a $20,000 pension at the end of it because you had all kinds of other money and that's all you wanted, you'd only be concerned about putting away $200,000, am I onto that?

MS. MACNEILL SMITH: That's at age 65 and that's very, very rough. It's just as a general . . .

MR. SMITH: Kind of a rule of thumb, right. Similarly, with a defined benefit plan, I had heard that if you could get 70 per cent of your gross income in retirement you should be able to maintain the same lifestyle. Is that kind of a rule of thumb?

MS. MACNEILL SMITH: The rule of thumb is, the goal is 70 per cent of your pre-retirement income from all sources. So you have your Canada Pension Plan, you've got Old Age Security, you've got your private pension plan and then you may have income from your own investments. Overall, if you have 70 per cent of your pre-retirement income, you shouldn't experience any drop in income. That the 70 per cent figure is not necessarily appropriate for all income levels. In some cases 60 per cent may be enough, but generally 60 per cent to 70 per cent is appropriate.

MR. SMITH: I've just been talking with people in the community. Because of the downturn in the economy a lot of people who might have retired last year or this year coming have decided not to retire because their plans had taken what they called a hit because of their investments. I was never sure who does the investing. When the money goes in year after year, I presume it's invested every year, is the employee the one who does that investing?

[Page 34]

MS. MACNEILL SMITH: For defined contribution plans, there are really two types of plans. The most common one is where the employees choose the investments among the options that have been offered by the employer. The employer may choose 10 investment funds and they'll say to their employees in the plan, you can choose to direct your investment among these 10 funds that we have selected. So the younger person may choose to be more heavily invested in equities, where the older person may have some in equities, some in bonds, some in real estate, so that's how it works there. There are also some very large defined contribution plans where the investments are not member directed. The employer manages and invests the whole of the fund and the employee contributions have units of investment in the pension fund, but it's actually the employer who directs the investments, but those are very unusual. It's mostly member directed investments.

MR. SMITH: So when these member-directed ones, which I presume the one at Antigonish is for the university - I'm hearing all the time people are sort of trundling off to see their investment counsellors and it seems to me that it's a real chore to have that responsibility and I think you've said that defined benefit plans have some advantages in terms of not having to worry about the investment, the promise that you know up front what you're going to get at the end, that kind of thing.

In these defined contribution plans which you say are much more the way things are going now, aren't we losing some advantages because of that?

MS. MACNEILL SMITH: Yes, you can have two individuals working side by side contributing the same amount, retiring at the same time, with very different results under member-directed investments. You may choose to invest conservatively, but it pays off better in the long run, where you may have someone else who decides to invest very aggressively and they may end up gaining or they may end up losing with respect to you.

It would be unusual to have the same result from two very similar people making investments.

MR. SMITH: I'm going to defer.

MADAM CHAIRMAN: Mr. Gosse, you have a couple of minutes.

MR. GORDON GOSSE: My question is, the Auditor General wanted your annual report to the minister to be filed within six months of the fiscal year end. Was this done?

MS. MACNEILL SMITH: Yes, it was. We filed it with the minister September 30th.

MR. GOSSE: The only other question I had, the Auditor General recommended in his report the penalties for late filing of actuarial violations reports. Do any other jurisdictions in the country impose such penalties?

[Page 35]

MS. MACNEILL SMITH: Only one jurisdiction and that's Quebec. They've imposed a penalty for another filing of an annual return. It's related to the actual size of the pension plan. We would propose in the next round of changes to the regulations under the Pension Benefits Act that we would impose a penalty. Hopefully that would encourage planned administration to make sure their reports were filed on time.

We agree with the Auditor General's recommendation, it's just a matter of getting on the regulatory agenda.

MR. GOSSE: My time has expired.

MADAM CHAIRMAN: Thank you very much. Thank you for all the good questions today on this subject. I would like to thank our guests again. Ms. MacNeill Smith, did you have any final comments for us, just to wrap up?

MS. MACNEILL SMITH: No, I think the state of the pension plans in Nova Scotia is relatively good. There are changes that need to be made by administrators to make sure that the plans are sustainable in the long run. There are certainly changes we can make to our regulations in maybe our legislation that will assist the employers to obtain that goal. Certainly we are all working together to improve things where we can. Thank you.

MADAM CHAIRMAN: Thank you very much again. I think one of the messages we heard today is that at this point in time in Canada there is a lot of attention on pension plans and the question that this is an opportunity now for us to turn our attention to it. I know there have been consultation papers and discussion about some of the changes and I do think that here, in the Legislature, we need to pay attention and hopefully embrace some of the changes that will ensure sustainability for the system. Thank you very much.

With that, I'm allowing for a short break here so that the members have a break before we meet again at 11:00 a.m. for our session on agenda setting, which will be our new method of setting our agendas. With that, could I have a motion to adjourn this committee meeting please.

MR. MACKINNON: So moved.

MADAM CHAIRMAN: Thank you, Mr. MacKinnon and with that, we'll recess for a few minutes.

[10:52 a.m. The committee recessed]

[11:02 a.m. The committee reconvened.]

[Page 36]

MADAM CHAIRMAN: I am glad to see everybody is back again. It is 11:02 a.m., we're going to begin our agenda-setting portion of this meeting. It is the Public Accounts Committee setting our agenda for the next month.

Just to recap, we have no meeting set for next week on April 14th and I would like to let the members know that we had the Nova Scotia Gaming Corporation lined up for that date and they had then called and said that the CEO was not available and they cancelled on us. So I would actually like the committee's support in sending a letter to them that we're disappointed that they had confirmed it and then cancelled us and we're now looking for a date to put them in. We offered them an opportunity to send another one of their executives and they had nobody else available. But I think it is important, the history of this committee is that when we ask for witnesses to come here, they do come and they make themselves available and I think that we should reiterate that with our guests from the Nova Scotia Gaming Corporation, with your approval. Yes, Mr. Preyra.

MR. PREYRA: We would have no problem with that except that there is the possibility that they have a very good reason for not coming, we should acknowledge that as well.

MADAM CHAIRMAN: Yes, I appreciate that. I have simply been told in the past that when the Public Accounts Committee asks for witnesses that they came and I recognize they may not be the most senior officials but they made themselves available and I think now it is difficult for us, especially if it has been booked, to be bumped is a difficulty. So, just to make that point, I think is important, so I would like to send a letter on that behalf.

Now we'll go on to the week after. Nobody set for next week. We have the regional health authorities coming on April 21st; the 28th is Environmental Monitoring and Compliance. These have already been pre-approved. We will be looking for a date in May for the Nova Scotia Gaming Corporation and that has been approved at an earlier meeting.

We have four weeks in May, four Wednesdays that fall in the month of May. We have the Auditor General coming on June 2nd, I believe is the Wednesday, which will be a long meeting, the in camera and the public meeting. So that also leaves four further Wednesdays in June. If we set four today we'll be able to put one into June as well. Our intent would be to have this meeting only once a month, at most, just making sure we have enough coming up.

With that I'd just like to let the committee know - of course this is the first time we've done this with the full committee - but what we have done in the past, in the in camera meetings of the agenda setting, has been to go from one caucus to the other, allowing somebody from that caucus to put one of the items on your list forward for discussion and for a vote, in fact, of whether or not there is support to bring that particular witness, or witnesses from that particular area, here to this committee.

[Page 37]

I think we'll follow that because when we met with just three members it was possible to look for overlaps a little bit more but I think in order to expedite it today we'll allow each caucus to go around and put one item on the agenda and we can move from there. So in keeping with our normal order in the committee, I'd like to begin with the Liberal caucus and ask Mr. Colwell if he'd like to propose one. I'd also like to make sure that the committee members all have the lists in front of them so you'll know where this comes from. Okay, Mr. Colwell.

MR. COLWELL: Yes, I'd like to move the Department of Justice, Maintenance Enforcement Program, as we have on our list, with the Deputy Minister of Justice and Director of Maintenance Enforcement Program to come forward.

MADAM CHAIRMAN: Okay, very good. So that will be our first one on the list. Did you want to have discussion with each one? I'm wondering if Mr. Preyra would like to discuss one or just have them come forward.

MR. PREYRA: I'm sorry, Madam Chairman, we're in a completely new world, I'm not sure how you would like to proceed. We do have a comment on that suggestion but I'm not sure if you want to go around before we do that or how we should address it.

MADAM CHAIRMAN: Well let's put Justice Maintenance Enforcement as one motion then from the Liberal caucus. Progressive Conservative caucus, please. Mr. MacMaster.

MR. MACMASTER: I would like to move that we bring forward the Insurance Bureau of Canada. While they are not a government body, there have been many examples in the past where we've brought in organizations that can give some perspective on decisions that government makes.

MADAM CHAIRMAN: Okay, and the NDP caucus. Mr. Preyra, would you be speaking?

MR. PREYRA: Well we're quite happy to talk about the Service Nova Scotia and Municipal Relations land registry system.

MADAM CHAIRMAN: Okay, I saw that on your list of three, so, very good. Now what we could do, since that's three, is have our discussion on those three, or vote on each one of those, and then see where we go from here in terms of getting items that are approved. Is that good with you, Mr. Colwell and Mr. MacMaster? Yes? Okay, very good.

On the first one that was proposed, maintenance enforcement, Ms. Kent.

[Page 38]

MS. BECKY KENT: Thank you. I just want some clarity. Are we only discussing the three today, that's it?

MADAM CHAIRMAN: No, I'd like to put more on. I suspect that maybe all three won't be approved by the full committee.

MR. PREYRA: I think we only have five minutes to proceed so I think - because we are scheduled to end at 11:00 a.m. and we've got a caucus meeting.

MADAM CHAIRMAN: You knew there was an agenda-setting meeting after.

MR. PREYRA: No, I didn't, I thought we would do it within the time that we had allotted. We had made plans to meet at 11:00 a.m.

MADAM CHAIRMAN: I'm sorry you didn't send me a note, I could have cut back our second round, but I had allowed for the full amount.

MR. PREYRA: Sorry, Madam Chairman, it is normal procedure to go from 9:00 a.m. to 11:00 a.m., I didn't see anything that said we would go beyond.

MADAM CHAIRMAN: This is a separate committee meeting, I'm sorry. But anyway, we won't discuss it now because your time is short, so we can certainly discuss it at another time.

With a motion to have Justice Maintenance Enforcement come before us, can I have a vote on that? Yes, Mr. Smith.

MR. SMITH: Madam Chairman, I spent two hours yesterday morning with the Community Services Committee meeting and Justice Maintenance Enforcement was thoroughly vetted by all Parties at that time. I just think it would be a huge time loss and redundancy for us to go through it all again. It was done yesterday, it doesn't make a lot of sense to me to rehash the same material. That's all available in Hansard, of course.

MADAM CHAIRMAN: Yes, yes. I was in attendance there yesterday. I would say that the approach was different than the Public Accounts Committee questioning would be. Mr. Colwell, did you want to speak to that before we have our vote?

MR. COLWELL: Yes, I believe it is relevant and if it was the Community Services, I'm aware of it being there, and, evidently, I understand there were many more questions that should have been asked. The focus in this committee is definitely different than what Community Services would have, so I still would like to maintain this one on our list.

[Page 39]

MR. PREYRA: I'd like to speak to that. The deputy minister was there with members of that particular unit to talk about Maintenance Enforcement, and there was a great deal of discussion - in fact, a lot of very specific discussion about the Auditor General's recommendations. I would propose, since not everyone was there, that we look at the transcript for that meeting and then reach a decision on that when we've seen the transcript.

MADAM CHAIRMAN: Are you proposing that we postpone the vote on Maintenance Enforcement?

MR. PREYRA: Well, if I was asked to vote today I would vote against it. I'm willing to concede that there might be members of the committee who are looking at other things and might reach a different conclusion, but I would concur with the member for Antigonish that this has been dealt with.

MADAM CHAIRMAN: Mr. Colwell, are you all right if we postpone the vote on that one? That means it will remain on our Liberal list.


MADAM CHAIRMAN: All right, thank you. Let's look at the Insurance Bureau of Canada, if we could, from the Progressive Conservative caucus. Shall I put the vote on the floor? Is there any discussion? Mr. Preyra.

MR. PREYRA: I'd like to speak to that, Madam Chairman. The Insurance Bureau of Canada - I'm not even sure how that's connected to the Public Accounts Committee. The Public Accounts Committee is really responsible for looking at government expenditures, those expenditures that have already been made, the extent to which those expenditures have been made, you know, with economy, effectiveness, and efficiency. The Insurance Bureau of Canada and this particular recommendation has no relevance at all to the work of this committee. There may be some other committee that can look at it, but I can't see how it fits within the mandate of the Public Accounts Committee.

MR. MACMASTER: I do believe that any decisions around insurance ultimately affect Nova Scotians and this committee - while we have discussions with government organizations, any decision by government that is going to affect insurance is going to affect Nova Scotians. Having a group like that here will allow us to ask questions to tie back into decisions made by government bodies.

MR. PREYRA: If I can just read from the mandate of the committee just to be clear: "the PAC is not fundamentally concerned with matters of policy." This recommendation that's being made here says that we look at the NDP Government's review of the cap on minor pain and suffering injuries in Nova Scotia. At best it's a policy question - it doesn't fit with the mandate generally, but at best it's a policy question. The committee does not call

[Page 40]

into question the rationale of government programs, but rather the economy and efficiency of their administration. It essentially looks at expenditures made, and this really doesn't fit at all with the mandate of the committee, and I would say that just on principle we would object to that being on the agenda. Not to say it's not an important issue - it is an important issue, and it will be discussed and has been discussed elsewhere - but certainly the Public Accounts Committee is not a place for that.

MADAM CHAIRMAN: I would say that this particular issue is difficult to find in another committee and it reflects on our committee's structure, not really providing the avenues, but Mr. MacMaster, would you like to respond?

MR. MACMASTER: I'll just deliver a very short response, and that's that I actually asked for some advice in this matter because I do recognize that this organization is not a government body, but there has been precedent in the past where there have been organizations brought in and it has been a value to the committee here. I think it's a value to Nova Scotians, and I still would like to move that we bring this group before this panel.

MR. COLWELL: I would agree with the Progressive Conservative caucus on this issue. The issue here really is that any changes that are made in the way that the province governs insurance companies could have a negative or a positive impact on the finances of the province, and I think that's very important. I believe that fits in the criteria of the committee. For instance, if the insurance companies aren't allowed to participate in health care costs that relate to an accident, that's a definite impact on the province, and long-term, a very detrimental one. I think there is a connection between what the insurance bureaus do and the province and the financial situation of the province as well.

MR. SMITH: I just want to suggest that I don't believe we have a mandate to review this. It is clearly a policy issue; it's got nothing to do with the financial review of government expenditures. That's our role - we can't be delving into these things that are not appropriately our mandate.

MS. KENT: Question.

MADAM CHAIRMAN: Yes, let's call the question. Mr. MacMaster, you are entitled to say something.

MR. MACMASTER: Could I ask for the opinion of Mr. Hebb who is the solicitor here today?

MADAM CHAIRMAN: Yes, certainly. Mr. Hebb, who has joined us today, could you comment on the appropriateness? Mr. Hebb, there you go, I don't think they caught you for Hansard though.

[Page 41]

MR. GORDON HEBB: Sorry, I said I don't think I have anything useful to add to the discussion.

MADAM CHAIRMAN: Thank you very much, so not at this time. So I would like to call the question for that - the suggestion is the Insurance Bureau of Canada coming as a witness. Would all those in favour of the motion please say Aye.

MR. MACMASTER: May we have a recorded vote?

MADAM CHAIRMAN: You would like a recorded vote. Is that all right with everybody? Good. Well, we'll do a recorded vote and we'll begin with Mr. Smith.


Mr. Colwell Mr. Smith

Mr. MacMaster Mr. Gosse

Mr. Porter Ms. Kent

Mr. MacKinnon

Mr. Preyra

MADAM CHAIRMAN: That is clear then. We do not have a majority for that. So that item is not there at the moment. It can come back. Perhaps we could look at somebody within government who could speak to the role of government in that. The last one we have on the table right now is the land registry system which has recently changed to a digital system. It might be something of interest to the committee and that was proposed by the NDP. Shall I just put the question?

[11:15 a.m.]

MS. KENT: Question.

MADAM CHAIRMAN: Would all those in favour of the motion please say Aye. Contrary minded, Nay.

The motion is carried.

We have one item on the go. Could I suggest too that we begin one more round quickly, we're going quite quickly. There is an overlap between the Liberal and Progressive Conservative lists for the Southwest District Health Authority and we did have them, I'm not sure if that's Mr. Colwell's next choice, but I'm looking for some overlap and maybe some understanding or agreement as we go forward. Mr. Colwell, would you like to propose, if you had another one that you think is a more important one, or would you like to propose one where we have an overlap?

[Page 42]

MR. COLWELL: I think the one with the overlap may be appropriate right at the moment.

MADAM CHAIRMAN: Yes, thank you. So that would mean we'll look at the Southwest District Health Authority. Would you like to propose a different one as well, Mr. MacMaster, from your list?

MR. MACMASTER: We would like to propose bringing forward the Mental Health Services Division of the Nova Scotia Department of Health and the funding levels required in upcoming years.

MADAM CHAIRMAN: I think actually that's a very topical one as well and even yesterday the Minister of Health said it is a priority for her government and for herself. Ms. Kent.

MS. KENT: I have a question regarding that. The memo that we have notes the Mental Health Services Division of the Nova Scotia Department of Health funding levels required in upcoming years which would suggest to me that that's related to budget future spending. Can we refine that to the degree which is appropriate for the mandate, which is past spending, because any time we delve into that we're going into a whole new, frankly inappropriate, area that the mandate of this committee is not appropriate where they're Budget Estimates and such.

MADAM CHAIRMAN: Yes, yes. Mr. Preyra, first.

MR. PREYRA: Madam Chairman, I think when we looked at this in agenda and procedures - and I think Ms. Colman-Sadd referred to this - this was something that was going to be a chapter in the June 2nd report and the suggestion was that we wait until we have seen that chapter before we proceed on that recommendation.

MADAM CHAIRMAN: Yes, Mr. Lapointe.

MR. JACQUES LAPOINTE: Yes, that is an audit that's currently underway and there will be a chapter on Mental Health Services in the report that will be provided on June 2nd.

MADAM CHAIRMAN: Yes, Mr. MacMaster.

MR. MACMASTER: I respect the points made and I accept what Mr. Preyra is suggesting and I do recall that now so I apologize for putting it forth.

MADAM CHAIRMAN: It is a very interesting one I think to all of us but we can perhaps hope to see that in June after we have received the Auditor General's Report. Mr. MacKinnon.

[Page 43]

MR. MACKINNON: I just wanted to go on record as indicating that this is very important and it should be on the agenda very shortly after the Auditor General's Report to us.

MADAM CHAIRMAN: I agree. Mr. MacMaster, did you want to propose a different one or Mr. Porter?

MR. PORTER: Madam Chairman, it's also on the Liberal list, I thought I had added it to mine but it is the Pharmacare Program through the Department of Health. It would be very worthy looking back to see how that has been going over the last year. It has been a fairly good program and there would be a number of questions that I would have around that.

MR. PREYRA: I am sorry, Madam Chairman, maybe I misunderstood, but did I hear a proposal that the southwest development authority would be a common issue that was being put forward?

MADAM CHAIRMAN: It was district health authority.

MR. PREYRA: Sorry, district health authority - where is that proposal now then?

MADAM CHAIRMAN: It was on both the Liberal list and the Conservative list.

MR. PREYRA: But is it being brought forward?

MADAM CHAIRMAN: Yes, Mr. Colwell has already put it on the table.

MR. PREYRA: Could we have a vote on that then, please?

MADAM CHAIRMAN: Rather than putting three out on the table, you would like to vote one by one? Fine.

MR. PREYRA: We have got to go, and I think if there is consensus or unanimity then I think that is probably the best way to proceed because I think we could go on for quite a long time.


MS. KENT: Madam Chairman, I just want clarity, is it the SouthWest District Health Authority or South Shore District Health Authority?

MADAM CHAIRMAN: Sorry, let's double-check, because there were two, they were on both lists . . .

[Page 44]

MS. KENT: So we want to be clear.

MADAM CHAIRMAN: The South Shore District Health Authority is definitely on the Conservative list - what is it on the Liberal list?

MR GOSSE: SouthWest Shore.

MADAM CHAIRMAN: Oh, we have two different . . .

MS. KENT: South Shore.

MADAM CHAIRMAN: You're right, there are two different ones; I saw them as the same. Is there anybody from the South Shore can say the difference - are they the same district health authority?

MS. KENT: It is either South Shore or SouthWest.

MADAM CHAIRMAN: The South Shore is the correct name, so the South Shore District Health Authority, but they are one and the same, I am just being told. So that is the one we would be voting on.

Thank you for correcting me on that because that is an easy one to mix up. So it is the South Shore District Health Authority and with that, and the proposal that we vote on them one by one, could I have all those in favour say Aye . . .

MS. KENT: What are we on?

MADAM CHAIRMAN: The South Shore District Health Authority, we're going to deal with it one by one.

Would all those in favour of the motion please say Aye. Contrary minded, Nay.

That motion is carried.

So that allows us two on our agenda and Pharmacare was the third one that had just been proposed from the Progressive Conservative caucus.

Can we go ahead with Pharmacare? Any discussion on that issue? I think it is one of the largest items in the Health budget and a good one to look back at and see how the spending has gone over the years and how well we're serving the public with the spending that we do - I believe it fits under the mandate is really what I'm saying.

[Page 45]

MR. PREYRA: Yes, it certainly fits within the mandate. I just wanted to get some refinement of the question itself so we can know what department, which witnesses.

MADAM CHAIRMAN: I think we would be looking for the executive director, certainly of that area, and possibly we could have the Deputy Minister of Health as well. Our Committee Clerk, Mrs. Henry says that would likely be whom we would invite, but we certainly would want the person in charge of the Pharmacare Program.

MR. PREYRA: Madam Chairman, I am not sure if we have a mechanism in place for doing this, but I think the calling of witnesses should also be subject to consultation so that committee members can decide who they would like to bring forward on some of these issues, just to bring greater clarity.

MADAM CHAIRMAN: I will say that generally we have left that to our clerk, once we define which area we want to explore and look at, understanding that our mandate is to look at the past expenditures and we look at who is most appropriate. Sometimes you'll bring an item here and not really know who is responsible within government. That is a problem.

So do you have any comment, Mrs. Henry about finding the right witnesses?

MRS. DARLENE HENRY: (Legislative Committee Clerk): Well, I just want to say that whenever the committee does bring in witnesses, I always go to the deputy minister within that department and then the person in charge of that file, whether it is an executive director or CEO, whoever.

MADAM CHAIRMAN: Thank you, that clarifies it for me as well, because I know that Mrs. Henry is just very good at finding the right people to bring before us.

But with that, could we have a vote on the Pharmacare issue as another one of the upcoming witnesses?

Would all those in favour of the motion please say Aye. Contrary minded, Nay.

That motion is also approved, so that's very good.

Could we have one more from the NDP caucus, would you like to put one more item forward?

MR. PREYRA: We would be very happy to move adjournment, Madam Chairman.

MADAM CHAIRMAN: All right, we have three on our list from today. Very good.

Thank you very much and I appreciate your time and I realize it is Tartan Day.

[Page 46]

We are adjourned.

[The committee adjourned at 12:23 p.m.]